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July 11, 2010

Financial Reform Vote at Top of List as Senate Reconvenes

Odds of passage improve as three more senators appear likely to back bill

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With the Fourth of July congressional recess ending, the Senate returns Monday, July 12, to consider passage of the financial reform bill approved by the House on June 30. While the bill did not make President Obama's July 4 deadline, it was widely expected that the bill would garner enough support to pass.

Several obstacles stood in its way prior to the holiday break, among them the death of Senator Robert Byrd (D-West Virginia). Although a successor to Byrd has not yet been appointed, and previously the Democrats did not have enough votes assured in the Senate to pass the bill without him, two Republicans and one of the two Democrats who previously voted against the bill have indicated that they will now support it.

Maria Cantwell (D-Washington) said July 1 that she would support the bill; she cited its tough approach to regulating derivatives as the deciding factor. Senators Susan Collins (R-Maine) and Scott Brown (R-Massachusetts) are also expected now to vote for the bill's passage. Brown had objected to the proposed $19 billion tax to be levied on banks to fund the bill. That tax was removed from the bill before the House vote.

The so-called "Volcker Rule" was another segment of the bill that was softened in last-minute negotiations; it would have barred banks from trading for their own profit, but loopholes now allow them to keep small investments in hedge funds and private equity funds, as well as giving them some discretion over how they quantify those investments. Volcker himself had worked to drum up support for the bill.

The Kanjorski Amendment, named for Rep. Paul Kanjorski (D-Pennsylvania), also remains, conferring on federal regulators the means to limit the activities of big banks and break them up if they threaten the financial system.

The question of the fiduciary standard remains up in the air, pending the outcome of the six-month study to be conducted by the SEC upon final passage of the bill.